Facebook has enjoyed a gangbusters week, thanks in no small part to its impending IPO on Friday. Today, according to the Wall Street Journal, Facebook even decided to increase the IPO to 421.2 million shares. But of course, the pendulum of Facebook’s fate always has to swing both ways. With this good news, a relic of Facebook’s tumultuous early years (see: The Social Network) has surfaced.
Business Insider has obtained the 2005 e-mail in which Facebook founder Mark Zuckerberg makes no bones about trying to screw former partner Eduardo Saverin out of his power position in the company. For anyone who hasn’t seen David Fincher’s Oscar winning interpretation of the quarrel between Zuckerberg and Saverin, long story short: Saverin froze the company’s accounts, Zuckerberg felt strong-armed and decided (with Napster co-founder Sean Parker) to structure the company so Saverin’s massive stock holdings would be whittled to a laughably low stake. But how to do so without awaking the sleeping shareholder?
That’s where Zuckerberg’s crafty lawyers came in. In an e-mail written at the time of Saverin’s ouster, Zuckerberg notes, “As far as Eduardo goes… to tell him who’s getting the [newly distributed] shares… might have adverse reaction initially.” He adds, rather indiscreetly (as 20-year-olds are wont to do), “Is there a way to do this without making it painfully apparent to him that he’s being diluted to 10%?”
And then comes the response from Zuckerberg’s lawyer, which basically foreshadowed the entire central conflict of The Social Network:
“The broad categories of legal risk are a) fiduciary duty. As Eduardo is the only shareholder being diluted by the grants issuances there is substantial risk that he may claim the issuances, especially the ones to Dustin and Mark, but also to Sean, are a breach of fiduciary duty later on if not now. I believe that you previously disclosed these future dilutative issuances to Eduardo before the LLC merger. This is what I recommended at the time. Nevertheless, it would be great if there is some way you could obtain a shareholder consent from Eduardo approving these new issuances. It isn’t *required* but it would be very advantageous and would go a very long way towards preventing any future claims he might have for breach of fiduciary duty. I mentioned this to Sean and he was going to give it some thought.”
If Parker is anything resembling his Social Network representation, I suspect that “thought” occurred in between rounds of beer pong. Everybody knows how this story ended. And now, thanks to Saverin’s settlement with Facebook and Friday’s IPO uptick, the bamboozled is a billionaire – five times over.
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